Finance Terms and What They Mean – RW Cars
Buying a car is exciting — but if you’re looking at finance options, you’ve probably come across a few terms that sound more like banking jargon than plain English. At RW Cars, we believe in making things simple, so here’s our easy guide to common finance terms and what they really mean.
1. APR (Annual Percentage Rate)
This is the total cost of borrowing money for your car, shown as a yearly percentage. It includes both interest and certain fees.
Tip: The lower the APR, the less you’ll pay over the length of your agreement.
2. Deposit
An upfront payment you make towards the car. The bigger the deposit, the smaller your monthly payments may be.
3. PCP (Personal Contract Purchase)
A flexible finance option where you pay lower monthly payments, then at the end of the term, you can either:
Pay the final lump sum (balloon payment) to own the car
Return the car
Trade it in for another one
4. HP (Hire Purchase)
A straightforward way to own the car at the end. You pay monthly until the balance is cleared — no final lump sum, and the car is yours once the last payment is made.
5. Balloon Payment
A large, final payment due at the end of a PCP agreement if you choose to keep the car.
6. Fixed Interest Rate
Your interest rate stays the same for the full term — meaning your monthly payments won’t change.
7. Term Length
The amount of time you’ll be paying off the agreement — usually between 24 and 60 months. Longer terms = smaller monthly payments, but more interest overall.
8. Equity
If your car is worth more than the remaining finance owed, that difference is called “equity” — which can be put towards your next car.
Why Finance with RW Cars Derby?
We make finance easy:
Clear explanations, no jargon
Flexible terms to suit your budget
Competitive rates starting from 9.9% APR
Visit us: RW Cars - DE21 4BB
Apply online: rwcars.co.uk